What the 2019 budget speech means for SA's small businesses
The South African economy has weathered a few storms over the past ten years, and is still above water. This is thanks to a number of factors, including the strong business sector and dogged media. But we’re not out of the woods just yet; the recent State of the Nation and Budget speeches highlighted a crucial area of our recovery – the small business sector.
Small businesses play a crucial role in stimulating economic activity and providing much-needed employment. However, research shows that while SMEs make up 98.5% of the SA economy, they only provide 28% of jobs. One reason is that 3.3 million of the country’s approximately 5.6 million SMEs are ‘survivalist’ one-person businesses that achieve little to no growth.
Xero reports that 62% of small businesses saw a reduction in consumer demand in 2017, and 68% described economic instability as their most significant challenge. It’s a challenging entrepreneurial landscape, but given that SMEs are an essential part of South Africa’s economic health, how is government planning to help them achieve sustainable growth?
From the top
In February’s State of the Nation Address, President Cyril Ramaphosa said government will focus on expanding the small business incubation programme. As part of this, promising entrepreneurs get access to the right support and resources such as business technologies training, access to finance, network links as well as actual space with shared services and connectivity.
Currently, the small business incubation programme is made up of 51 technology business incubators, 10 enterprise supplier development incubators and 14 rapid youth incubators. In the Budget Speech, Finance Minister Tito Mboweni said that R481.6m will be allocated to the Small Enterprise Development Agency to expand the small business incubation programme.
According to Xero’s report on the state of small business, 85% of entrepreneurs fund their own businesses. Not everyone is in a position to self-fund their business and this prohibits entrepreneurial activity, pushing people to look for work in the traditional job markets. So, this is a step in the right direction in fueling growth
Tapping into technology
The impact of globalisation is increasingly prevalent; South Africa is subject to global market forces, technology trends and growing competition. How companies operate is changing fast – and small businesses need to stay up to date to stay relevant.
New technologies such as automation are having a rapid impact on the world of work. Minister Mboweni spoke of the need to prepare the country for digital transformation. The long-term plan includes a focus on education, with a specific focus on subjects like maths and science.
To help fast-track our country’s digital business expertise, Minister Mboweni mentioned an ambitious FinTech programme, driven by the Governor of the South African Reserve Bank and colleagues from the other financial-sector regulators. For SA’s small businesses, we know that adopting the right tools can significantly boost their productivity and profitability.
Cloud technology can give SMEs the support they need to do fast, smart business; enabling them to set ambitious growth targets and hit them.
There’s no sugar-coating it; South Africa has a tough economic road ahead. But, to echo both President Ramaphosa and Minister Mboweni, we can do it if we acknowledge our collective responsibility and all work together. For small businesses the message is clear: government recognises you and is going to do more to support you. But government support is not the only available helping hand: proactive entrepreneurs who use tech to boost their businesses stand a great chance to achieve growth and success – both here and perhaps globally too.